You will choose where each goal's money will be kept and record why.
Your goals sheet from lesson 1.4 has a column called "where it is kept", and for most people it is still blank or says "bank". This exercise fills it in for every goal, with a reason and a date, and it draws on all three lessons of this module so far. Allow about twenty minutes, plus time to check a few current rates.
Open your goals sheet. Beside each goal, check the months left and the type you gave it in lesson 1.4: fixed, flexible or optional. Then add the band from lesson 2.1, Your time horizon decides how much risk a goal can take: under two years, two to five years, or over five years.
A fixed goal near the end of a band should be treated as belonging to the shorter one. A flexible or optional goal can be treated as a little longer.
Next, list the payment dates, not only the goal date. Many goals are paid in pieces. A wedding has deposits spread across a year or more. A home has a payment when you book or take the option, more when you sign, and the rest when you collect the keys, followed by renovation. A course is paid per semester.
For each goal, write down every date when money has to leave your hands, and roughly how much. The money must be reachable by each of those dates, not only by the final one. A goal that looks fine against its final date can still miss an early deposit.
Now match each goal, or each part of a goal, to a place from lesson 2.2, Savings accounts, fixed deposits, T-bills and SSBs compared, or to investments from lesson 2.3 if it is a long goal.
As you choose, run three timing checks.
A fixed deposit's term must end before the payment it is meant for, with some days to spare for the money to reach your account. A T-bill must mature before the date you need the money, and you can only buy one at an auction, so check the MAS calendar for when the next suitable auction is and when it matures. An SSB is redeemed by applying during one month and receiving the money early in the next month, so the redemption has to start at least a month before the payment.
Savings accounts pass every timing check, which is why the money for any payment due within the next month or two usually ends up there.
Here is how Mei and Daniel fill in their sheet. These are their choices, and the part to copy is the reasoning beside each one.
The wedding needs S$31,200 paid out over the next 30 months, from a S$10,000 banquet deposit in month 12 to S$6,300 of final payments just before the day, as lesson 3.4 will set out. They keep the next six months of payments in a savings account. Money for payments further out goes into fixed deposits whose terms end a few weeks before each payment. Where to keep it: savings account and fixed deposits timed to deposit dates. Move-to-cash date: each deposit's money is in the savings account one month before it is due.
The home cash part, S$32,000 over 60 months, has a fixed date but is far enough away that they don't need instant access for most of it. They hold most of it in SSBs bought over time, because they can redeem in any month without a penalty if the HDB dates move. Where to keep it: SSBs, with a few months of savings in the savings account. Move-to-cash date: start redeeming six months before the expected key collection date, so the money is in the savings account well before the payment.
Daniel's diploma, S$8,000 in 24 months, is paid per semester. Where to keep it: savings account, with one fixed deposit timed to the first semester's fee. Move-to-cash date: each semester's fee in the savings account a month before.
The car is optional and five years away. They decided in lesson 2.3 not to invest it. Where to keep it: T-bills, rolled from one to the next, since they have no payment date to meet yet. Move-to-cash date: none until they decide to buy, then at least one maturity before the purchase.
Add a "where kept" column and a "move to cash" column if you haven't already. In the first, write the place and a short reason, such as "SSB: fixed date, five years, may need it in any month". In the second, write a real date: the month by which this money must be sitting somewhere you can withdraw from on the same day.
For long goals that are invested, this is the date you start the step-by-step move from lesson 2.1. Put it in your calendar now, because nobody remembers a decision made five years earlier unless something reminds them.
Finally, check the sheet once more against the payment dates. Read down the sheet one goal at a time and ask: if a payment were due tomorrow for this goal, could I pay it? If the answer is no and the payment is within a month or two, move that slice into the savings account now. If the answer is no and the payment is years away, check that your move-to-cash date leaves enough time.
Every goal on your sheet shows where its money is kept, a one-line reason, and a move-to-cash date. Any goal paid in instalments lists its payment dates, and none of them falls before the money can be reached. The activity asks you to add the two columns for your own goals.
Add a where-kept column and a move-to-cash date to your goals sheet for every goal.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).